Study On The Influence Of Governance Structure And Agency Costs On The Private Companies Executives Stock Reduction

As the company’s core human capital and management staff, Executives play animportant role in business development. Different from general staff motivation,traditional way is hard to produce good results for executives’ incentive. Therefore,equity incentive which is known as "golden handcuffs" becomes a hot topic in theoristsand practitioners."Interest equalization effect" thinks that equity incentives can pushexecutive’s interests and shareholders’interests to be consistent and inspire executives’diligent efforts for the company’s development. However, there is a universalexecutive’s stock reduction phenomenon in listed companies especially privatecompanies. There are8990executives’reductionbehavior only between2008and2012.Obviously, this is depart from the original of equity incentive mechanism design.Executives’reduction behavior can be understood as the agency problem betweenexecutives and shareholders. The Separation of ownership and concession marks theestablishment of modern enterprise system. However, the agency problem emergenceconcomitantly. Agency costs can be used to measure the strength of the agency conflict,the higher of the costs of the company’s agency, the more serious of the agency conflict.When the company’s proxy conflict is higher, it will be more difficulty for shareholdersto supervise executives’ behavior. So the executives may choose to deviate fromshareholders’ desire. Corporate governance structure is an organizational structure ofShareholders, board of directors and senior management. Corporate governance is usedto solve agency problems, it can deal with the relationship between the companyprincipals and agency clients. It has a certain significance to study executive’s stockreduction behavior from the perspective of agency costs and governance structure.This article selects listed private companies of2008–2012in Shenzhen andShanghai as samples, collecting the five-year data, using SPSS software for processing,using correlation analysis, regression analysis and other methods for in-depth study. Inthis paper the agency costs is divided into the first agency costs and the second agencycosts to be considered. Corporate governance is divided into the major shareholders governance, board of director’s governance and the supervisory board governance. Itselect the eight variables involved in the corporate governance structure to research therelationship between corporate governance and executives’ reduction behavior. Theempirical results show that a significant positive correlation showed between agencycosts and executives ‘reduction level. We can see that the higher of the agency costs,the higher level of the executives ‘reduction. It also shows that the higher of theproportion of the largest shareholder, the higher level of the executives ‘reduction.Actual controllers of the company start as the chairman of board of directors or CEOhave some effect for suppression to executives ‘reduction. Executives ‘reduction leveland board size have showed a negative trend. CEO serves as director of the companyincreased the reduction level of executives. The results show that executives’reductionbehavior can be viewed as the consequence leading from the agency problem, the moreheavily the agency conflict, the higher the executives’ reduction, and completecorporate governance structure can restrain executives’reduction behavior to a certainextent.